U.S. Department of Commerce Reports Large Decrease in American Durable Goods

The Department of Commerce released its monthly report on Durable Goods Manufacturers' Shipments this past Thursday.  In August 2012, new orders for manufactured durable goods fell $30.1 billion (13.2%) to $198.5 billion.  This decrease represents the most severe drop since January of 2009.  While the durable goods report is highly volatile and not representative of the economy on the whole, it does provide insight into the performance of manufacturers that produce high value-added goods such as cars, turbines, semiconductor equipment, computer products, and electrical equipment.  Additionally, the Census utilizes the report in its Gross Domestic Product estimates.  American durable goods manufacturers had previously enjoyed three consecutive months of increases, and the over $230 billion value of shipments in July 2012 marked the first time the figure had recovered to pre-recession levels. The drastic 13.2% reduction, while not necessarily the best indicator of long-term trends, can be utilized to make short-term earnings predictions regarding the industries represented in the report.  An important note regarding this report: civilian aircraft orders fell significantly, and burdened the overall figure.  Orders for nondefense capital goods excluding aircraft increased 1.1% in August, and this important portion of the report is a good barometer of American business; thus, despite the 13.2% overall drop, many manufacturers did in fact experience a healthy increase in orders.